Experts advise SMEs, Banks on Profit, Loan Repayment

Financial experts have highlighted the need to educate the Small and Medium-scale Enterprises (SME) on how to run profitable businesses and be able to repay loans.

Experts, who spoke in separate interviews with our correspondent, said most SMEs died within the five years of business due to inexperience and lack of business intelligence. The President/Chairman of Council, Chartered Institute of Bankers of Nigeria, Dr. Uche Olowu, said the reason most businesses died in the early stage was that their business goals were not conceptualized. According to him, the starting point of any business should be conceptualization of the value to be added and gap to be closed through the business.

He stated that access to capital should not be the first thing to pursue in business. Olowu said “It is very important for entrepreneurs to ask themselves questions and come up with a workable document; with that, they can approach institutions for loan facilities. commercial banks will not extend facilities to start-ups because the SMEs do not have a proven ability of loan repayment.”

“The problem that SME owners have is that the just venture into entrepreneurship without thinking it through; then that apply for loans when the are not able to sustain the business, it crashes. What happened to the loans? “Once the SMEs begin to prove to be successful, then the financial institutions can now come in to give loans. Banks, commercial banks in particular, are dealing with other people’s money; that is why they are being very careful in giving out loans.”

Olowu, who described the saving s culture of Nigerians as very poor, said the SMEs would not be able access loans if people were not saving. He said there was a need for banks to conduct feasibility studies on businesses before giving out loans to them in order to determine their chances of survival and to know how much to be disbursed to them.

According to him, too much money will make them spend anyhow and too little will not make the business successful. Olowu added that there should be a handshake between government and the banks, with each party contributing its own quota, ranging from the ease of doing business to reducing multiplicity of taxes to financial advisories that would help the SMEs manage their finances.

He noted that many SME owners were not disciplined enough to manage their finances. He said, “Advisory services are very important. Government agencies should gather people, educate them on how to run profitable businesses. Nigeria has huge potential. Commercial banks should also join forces with microfinance banks to fund the SMEs. Most importantly, SMEs need to be understood before being given any sort of loan.”

According to a lecturer at the Department of Economics, University of Lagos, Dr. Ayodele Shittu, banks should be able to establish that each SME possesses the capabiity to learn over time. Shittu stated that there was a need for partnerships between banks and SMEs, saying banks should see themselves as key stakeholder and partners in progress in the SME world. “Government should put in place a learning infrastructure where the SME business owners can come together to rub minds. When they have such platforms, it helps to enhance their experience and help to mitigate emerging risks,” he said.